State of the U.S. economy in February 2018


The stock market and economy move in sync over the medium-long term. That’s why it’s extremely important to understand the state of a nation’s/region’s economy. Is the economic data improving or deteriorating?
Let’s take a look at U.S. economic data as of February 2018.
Unemployment
The U.S. unemployment rate has been flat for the past 3 months. The trend is still DOWN.

Inflation
U.S. inflation is stabilizing just above 2%. I expect inflation to slowly rise throughout 2018.

Initial jobless claims
Initial jobless claims continue to make new lows. This is a long term bullish sign for the stock market because jobless claims tend to rise before a bear market begins.

Private nonfarm payrolls.
Private nonfarm payrolls are slowly trending down. This is normal. Private nonfarm payrolls tend to peak during the middle of an economic expansion. We are in the final quarter of the current economic expansion.

Manufacturing PMI
After a surge in the 2nd half of 2017, the ISM Manufacturing PMI is flat.

Industrial Production growth
U.S. Industrial Production continues to grow at a faster and faster rate. This is partially due to an increase in oil prices. Expect growth to slow down once oil prices stop rallying so quickly.

Small Business Optimism
The NFIB’s small business optimism index has peaked. Historically, this is as high as it gets.

Total Vehicle Sales
Total Vehicle Sales have been falling over the past few months. Historically, Total Vehicle Sales typically peak a few years before a recession begins.

Consumer Sentiment
U.S. Consumer Sentiment continues to trend higher.

Retail Sales growth
U.S. Retail Sales growth has trend higher over the past few months.

New Home Sales
U.S. New Home Sales continues to trend higher.

Conclusion

U.S. economic growth has accelerated over the last few months. The data might deteriorate a little in the short term because it’s “too good”, but there are no signs of long term deterioration. Hence, the Medium-Long Term Model predicts that this economic expansion has 2 years left.

3 comments add yours

  1. Troy, I am extremely perplexed and confused with the 4% sell off in 1-week with 2% of that coming in Friday alone. There was no geopolitical event like June of 2016 with brexit, but this was the worse % decline on a single daily basis since that event. I understand the Norwegian institutional pension fund is the largest in the world. So a couple of large institutional funds decide to run this market up to new all time highs last Friday then decide to take profits this week with the cherry profit taking on Friday alone? What other event other than extremely large institutional funds taking profits would cause a 666 point down day!? Outrageous and mind blowing!

  2. First, thanks for the consistent amazing content.
    I’ve noticed when you talk about economic data you seem to use different timeframes. Is there a standard timeframe you use? Also, do you find that looking at different timeframes for different indicators works best or to be consistent?

    • When it comes to looking at trends, a 10 year chart for the data is best. But for an economic “trend”, 12 months is good.

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